A Lasting Power of Attorney (LPA) is a document which appoints people you trust (called attorneys) to look after your financial and your personal affairs should you become unable to look after them yourself, perhaps through illness, accident or advancing years.
It is critical that such arrangements are made while you are fit and healthy and have the mental capacity to do so as the law does not permit you to make such provisions after you have lost your mental capacity. There are 2 types which cover different aspects of your life but are equally as important.
An LPA can only be used when it has been registered at the Office of the Public Guardian and with your consent. Even though you may have arranged an LPA this does not mean that your attorney takes over your life, whilst you are able to give it, they must obtain your instructions and consent before they act on your behalf.
Property and Financial
A Property and Financial Affairs LPA enables your attorneys to be appointed to manage your financial life- money, property and other financial assets. This may include selling your home, investing your money, paying your bills and care home fees and generally looking after your assets. They may use this type of LPA if you have capacity or not.
Health and Welfare
A Health and Welfare LPA enables your attorneys to manage personal and healthcare matters- such as where you live, what you eat, who looks after you and what type of medical treatment you receive. They will be an advocate for you when you cannot speak for yourself. They may only use it when you have lost mental capacity.
Individuals and Business owners
Individuals
Most people acknowledge the importance of making a Will and getting their affairs in order in the event of their death, however, practically nobody makes similar provisions should they become unable to look after them themselves during their lifetime. Lasting Powers of Attorney are not just for older people, we all should consider them.
The unexpected
Anyone at any age can be unexpectedly taken ill or have an accident and if you hold assets in your sole name such as an ISA, bank account or other investment, and you lose your mental capacity (even temporarily e.g. you are in a coma) and cannot look after your affairs, your financial life could quickly be adversely affected if you have not appointed someone as your attorney.
We are living longer
We are all living longer and with the advances in medical science this is an increasing possibility. A Health and Welfare LPA will be needed when you are making decisions about a person’s well-being, where they live, and what type of medical treatment they receive or not as the case may be. If you don’t appoint an attorney ultimately the doctors make a best interest decision about you.
Assets in your sole name
Your spouse or partner may need to access money to pay the mortgage or other important bills, pay staff wages or suppliers to keep the business running and organisations will not speak to a third party unless they have the legal authority to do so and you will certainly not be able to access their bank account.
What if all your accounts are in joint names?
If you have a joint bank account, it is not certain that the bank will allow the other joint account holder to access the account. It's really npt worth takimg the risk that your accounts are frozen. Life will become very difficult if this happens.
The British Bankers Association has this to say:
Dealing with a joint bank account
“A joint account allows two people to use an account either separately or together. Depending on the terms and conditions of the joint account, another person may be given access to a joint account on behalf of one of the account holders.
If one joint account holders loses mental capacity, banks and building societies can decide whether or not to temporarily restrict the use of the account to essential transactions only (for example, living expenses and medical or residential-care bills) until a deputy has been appointed or a power of attorney registered. If a person has a joint account with someone who is losing mental capacity, they should talk to their bank or building society.“
How many attorneys do you need to appoint?
We advise to appoint at least 2 people if you can, so that if something happens to one of them, you have someone else to carry on looking after you. You may also like to have replacement attorneys in case your first choice dies, becomes bankrupt or is not able to act for you for some reason. It is possible to appoint more than one attorney, and specify attorneys to act jointly in some matters, but separately in others.
When can I use the LPA?
Only when it has been registered and validated at the Office of the Public Guardian, can a LPA be used by your attorneys. Its takes 8-10 weeks for this has be done and so planning in advance is key.
Business Owners
Having an LPA in place, is prudent risk management as the effect on your business if you were not able to run it could be catastrophic. Giving someone the legal authority to act on your behalf will ensure the continuity of the business even if your lack of capacity is temporary.
It may be able to run in the short term but this would not sustainable in the longer term and the effects would be felt. Salaries may not be paid, access to the bank account denied, insurances left to lapse and invoices unpaid and most importantly HMRC would not get their tax
Your business may also need specific expertise or qualifications to enable it to continue and you may need appoint someone who is as qualified as you are to keep it running. This is critical as you should choose 'like for like' expertise.
Did you know that since the Mental Health (Discrimination) Act 2013 a business partner or co-director who lacks mental capacity cannot be removed?
Things to consider
- The first step in preparing a business LPA is to review the company’s articles of associations, and partnership or shareholder agreements.
- You will then need to identify a suitable attorney. This should be someone you trust and who you know you know is capable of running your business and has the relevant knowledge, expertise and qualifications of the market you operate in and knows your business as well as you do. They may act on your behalf alongside a family member, to negotiate contracts independently of the second attorney, but only access bank accounts with the approval of the second attorney.
- Before a business attorney accepts their role you should ensure that they fully understand the responsibilities including taking out their own personal liability insurance to ensure they are protected whilst acting on your behalf, and commit to follow health and safety regulations and policies any anything specific to your business.
- When it is registered, the LPA will allow your business attorney to make financial decisions on your behalf, including buying and selling property, arranging property insurance and repairs, accessing bank accounts statements, investing assets, and dealing with tax affairs, paying staff and suppliers.
Important safeguards
The Mental Capacity Act 2005 includes a Code of Practice
- The document may only be used once it has been registered and validated with the Office of the Public Guardian and with your permission whilst you have capacity to still make your own decisions.
- Your attorney’s must act in your best interest at all times.
- They must take your instructions, views and concerns into account before making any decisions on your behalf and must use the least restrictive way of achieving the desired outcome.
- They must keep financial records of what they are spending your money on and cannot use their money for.
- They cannot spend your money frivolously or in a way that is not how you would have spent your money personally eg. give expensive gifts or money to your family for birthdays and Christmas
- You may send a Notice to other people of your intention to register the LPA to give them an opportunity to object or raise any concerns they may have over your intended appointments.
- You can restrict the LPA so that it can only be registered if you are unable to manage your affairs and restrict the powers of the attorney, although this needs careful consideration before impose restrictions.
- The Office of the Public Guardian may, at any time, ask your attorneys to account to them for their actions and ask them to produce evidence of what they have spent your money on or why they have disposed of your assets.
Pre October 2007
Enduring Power of Attorney
Before the introduction of Lasting Powers of Attorney on 1st October 2007, an Enduring Power of Attorney was the document drafted. Existing Enduring Powers of Attorney are still valid provided that they were signed before 1st October 2007 and do not need to be replaced with the new Lasting Power of Attorney. However, they only cover your financial life and not your Health and Welfare
You cannot make amendments to Enduring Powers of Attorney and if you want to change anything you will need to replace it with a Lasting Power of Attorney.
NO EPA or LPA
Court of Protection
If you do not have a LPA or an EPA, lost your capacity and you need someone to look after your affairs, your family will need to make an application to the Court of Protection to be appointed as your “Deputy”.
The Court will make decisions on financial or welfare matters for people who can’t make decisions at the time they need to be made (they ‘lack mental capacity’). It’s a long and expensive process. Current timescales are between 7 - 9 months and several thousands pounds in associated costs.